AVI improves its margins in the face of rising costs
bdlive.co.za - Sep 12th 2016, 12:26
CURRENCY hedges and a focus on cost containment helped consumer brands group AVI limit the damage of rand weakness in the year to June and continue to improve its profit margins.
AVI reported revenue rose 8.4% to R12.2bn, with consolidated headline earnings per share (HEPS) rising 10.6% to 464.1c, near the upper end of a recent trading update flagging a 10%-11% increase to 461c-466c.
Gross profit rose 8.6% to R5.35bn with the consolidated gross profit margin improving from 43.8% to 43.9%, while operating profit rose 12.4% to R2.15bn and the operating profit margin increased to 17.7% from 17%.
Return on capital was 27.9%.
Finance costs more than doubled, rising 108.1% to R135.9m from R65.3m the year before, which AVI said in its results statement was in line with expectations.
First-half finance costs rose 85% to R60.4m, an increase that analysts said at the time was justified by the high return on capital.
A final dividend of 220c per share was declared, for a total dividend for the year of 370c, up 11.5%.
AVI had warned of a drop in profit for the footwear and clothing division — which houses brands such as Spitz and Kurt Geiger — where it increased prices as a result of the weak rand driving up the costs of imports. Operating profit fell to R320.2m from R355.7m and the operating profit margin declined to 21.8% from 25.2%.
Frozen fish brand I&J, on the other hand, benefited from the effect of the currency weakness on export sales. Revenue rose 10.8% to R2.17bn, and the operating profit margin widened to 15.2% from 12.7%, despite lower average catch rates than the previous year.From DFM Publishers (Pty) Ltd
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